The Minister for Asia addressed business representatives at Asia House's conference 'A new trade era – what it means for the UK and Asia'.
Thank you Michael for that introduction. I am delighted to have the opportunity to speak to such a knowledgeable business audience and to join distinguished colleagues from the diplomatic world on the panel.
Many commentators call this century the Asian century.
For Historians, though, the reality is that the economic centre of gravity is merely returning Eastward. In the 1700s Asia’s share of global GDP was nearly 60%. Today it is just under 30% and rising.
And most forecasters predict that this will grow to over 50% by 2050. Some think we will reach that point much earlier, perhaps as soon as 2030.
So whether you are a commentator on the present, a historian focused on the past, or a forecaster predicting the future, the message is clear: Asia was, is and will remain one of the most economically dynamic regions of the world.
The world economic order is reverting to what was the norm.
That’s why we want to continue to strengthen our engagement in Asia. We want to reinvigorate existing relationships. And we want to reach out to new partners who have not always received the attention they deserved.
As I am sure you all noticed: in June the UK voted to leave the European Union. This was the biggest democratic exercise we had undertaken in a generation.
Now many of you will know that I campaigned for the UK to remain in the European Union. And, like any politician who loses a vote, I was obviously disappointed on the 24th of June when the result was announced. The sky has not fallen in. In fact the UK economy continues to grow – and more strongly than expected. Our business environment remains highly regarded – the World Bank ranks us seventh globally in the world in terms of ease of doing business – one place above the US.
The World Economic Forum also ranks us seventh in terms of global competitiveness. We have a respected system of contractual law, as well as the lowest corporation tax in the G20 – clear proof that the UK remains open for business.
And since my appointment as a Minister in July, I have travelled throughout Asia, to China, Japan, India, Indonesia, Australia and New Zealand, and there is more travel to come before the year ends.
My immediate priority has been to reassure key contacts about the immediate implications of a result that few had expected. In my meetings with government ministers and business leaders, while the first question may have been about Brexit, the second one has almost always been about boosting bilateral trade and investment.
I hear the same messages from my colleagues across Government. The Chancellor has visited China and the Secretary of State for Business, Energy and Industrial Strategy has been to Japan. Ministerial colleagues from the Department for International Trade and other government departments have also travelled extensively in the region.
And the Prime Minister’s first bilateral visit outside Europe was to India. That speaks volumes about her commitment to enhancing Britain’s relations across Asia. More travel to Asia by more members of the Government, more trade missions and more engagement by every part of government is planned for next year.
So we can have those conversations about the future and the opportunities it presents. I find people increasingly positive about both.
On a practical level, we are also looking forward to the opportunity to engage in different ways with Asia once we are outside the EU, for example through the Regional Comprehensive Economic Partnership and ASEAN.
And we have already established trade working groups, including with Australia, New Zealand, China, Japan and India. Broadly the aim of these is to discuss, on a bilateral basis, how we can improve trade now, and start to scope out what a trading relationship may look like post Brexit.
Of course, I want to make it clear that whilst we are a member of the European Union we will continue to support FTA discussions that the EU is having with countries like Japan, Australia, and New Zealand. And of course we can only start formal FTA negotiations with third party countries after we have concluded on our relationship with the EU.
And businesses continue to be attracted to the UK. Softbank’s £24bn acquisition of ARM, including a commitment to double the number of employees, shows that Britain has lost none of its allure to international investors.
Chinese Developer ABP will invest £320 million in Phase 1 of the £1.7 billion London Royal Albert Docks project. There’s also Nissan’s recent commitment to build the next generation of Qashqai and Xtrail in the UK, upgrading their factory to a ‘super plant’.
There used to be a perception that, frankly, trade issues were beneath the Foreign Office. That they were apart from the day to day work of Britain’s international diplomacy.
Since my arrival, though, I have seen the relentless focus of our Ambassadors and High Commissioners on securing business for British companies, and helping to foster commercial links between the UK and partner countries.
Diplomatic life these days is less about consuming Ferrero Rocher chocolates and more about promoting high tech widgets manufactured in the Midlands.
And as the Minister for Asia, I am part of wider Government effort working hard to intensify and enhance UK-Asia trade. I work closely with the Prime Minister’s Trade Envoys. And I pay tribute to Richard Graham, Lord Faulkner and Lord Puttnam for all their hard work across the region. They are great assets for HMG as well as British business.
We work closely with Chambers of Commerce too. We support the work of the UK India Business Council, the China British Business Council and the UK ASEAN Business Council.
We put our money where our mouth is and provide annual grants to help part fund these organisations. All three are membership organisations who offer tailored support to large corporations and SMEs that are looking to expand their trade with or attract investment from the region.
As I saw in person, the new offices of the British Consulate in Guangzhou is co-located with both the China British Business Council and the British Chamber of Commerce – a model we are adopting in more and more cities in Asia.
And of course the Department for International Trade was created to ensure a whole of government effort to promote British trade across the world and ensure the UK takes advantage of the huge opportunities open to us.
Now I hope you will bear with me because no ministerial speech would be complete without a list of bewildering statistics, which officials love.
We have very many brilliant people working in the civil service but I’m sure the dream of some officials is a Ministerial speech which consists entirely of statistics.
Here goes! The data is positive! Total UK exports to China have grown 57% in the last 6 years. China has risen from our 10th largest export market in 2010 to our 4th largest in 2015. In the same year, total UK exports to the 6 largest ASEAN economies [Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam] equated to our 11th biggest export market.
We are seeing that it is working for investment too.
This country is home to more Chinese investment than any other European country, with a total stock of £9.8 billion and an investment flow of £1.2 billion in 2014 – including Huawei, which is headquartered in my own constituency. China is expected to be the UK’s second largest foreign investor by 2020.
Investment from ASEAN is also growing and the region now ranks as our 6th largest foreign investor. The cumulative stock of FDI from Singapore, Malaysia and Thailand in the UK is over three times that in the US and Germany combined.
More than 1,000 Japanese and over 800 Indian companies base themselves here, employing a quarter of a million people, in a wide range of sectors. India is our third largest foreign investor, with more Indian companies investing in the UK than in the rest of the EU combined.
Phew! Hope you got all that. The summary message is both bilateral trade and investment is improving. But we can do better still.
Now your programme for today’s event talks of a new trade era. Last Monday, the Prime Minister set out her vision for that new era. Now I recognise that there is something of a debate at the moment about the merits of free trade.
So let me be clear about the government’s view. The Prime Minister recognised the overwhelmingly positive impact of liberalism and globalisation. That these twin forces have lifted millions out of poverty, broken down barriers between nations and people and strengthened the rules based international system on which we all depend for our security and prosperity.
Of course we must acknowledge that there have been downsides. That while the tide of globalisation has carried many with it, it has also left others trailing in its wake. It was their voices that could be heard in the results of the EU referendum and the US Presidential election.
As the Prime Minister has said, we must listen to their voices, but our response should not be to reject global trade or to retreat into protectionism.
So the UK will carry on being a vocal champion for free trade.
And the UK will continue to champion the benefits of globalisation. But we must also recognise that some things have to change. We must preserve what works and adapt what does not.
We believe that, once outside the EU, the UK has a great opportunity to lead the world into this new era. To be the strongest advocate for free markets and free trade. To support successful businesses while at the same time encouraging them to support a successful society. A society that works for everyone.
And as the Prime Minister said, our approach is not going to be about propping up failing industries or picking winners – we will leave that to free market competition.
What it will be about is creating the conditions, through our new industrial strategy, for business to thrive, to the benefit of all. . So I want to reassure you that the UK will not be stepping back from the world, as some people seem to fear. Quite the reverse: outside the EU the UK will be free, flexible and agile. We will play a global role – in foreign policy, international security and development, as well as trade.
We will be an independent nation working alongside the traditional trading blocs and trading freely with others - in our best interests and theirs.
Let me end with the words of the Prime Minister: “change is in the air, and when people demand change it is the job of politicians to respond”.
But business leaders have a key role to play too, in understanding the need for change. After all, adapting to customer demand is a fundamental principle of commerce.
As we all know, having to adapt and change brings risks, but it also brings great opportunities.
As the UK leaves the EU and as the world enters a new era for trade, the British Government wants to work with business to champion global free trade, to remain outward looking to harness these opportunities.
Asia, all of Asia, with its dynamic economies and vast potential, will be at the heart of our approach. That is my personal commitment to you.
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